By: Elijah T. Newcomb
St. John’s University School of Law
American Bankruptcy Institute Law Review Staff
In In re Brinskele, a bankruptcy court in California held that a judgment lien against Edward A. Brinskele (“Spouse”) was enforceable against the real property of his wife, Rebecca Brown Brinskele (“Debtor”), where the Spouse quit-claimed his interest in that property to the Debtor after a judgment lien had been recorded.[1] The United States assessed over $950,000 in trust-fund-recovery penalties against the Spouse on December 21, 2001. and the IRS filed a proof of claim.[2] The United States recorded a Federal Tax Lien against the Spouse for $957,146.60 on May 30, 2002.[3] The Spouse unsuccessfully sued for a refund and the Court of Federal Claims granted the United States’ cross motion for a judgment of $1,514,140.14 plus interest (the “Judgment”) on September 3, 2009.[4] The United States recorded an abstract of the Judgment against the Spouse with the Marin County Recorder’s Office on June 23, 2011.[5] The Spouse quit-claimed his interest in certain real property in Marin County, valued at $1,595,000.00, to the Debtor on April 23, 2012.[6] Facing bankruptcy, the Debtor filed a voluntary petition for relief under Chapter 11 of title 11 of the United States Code (“Bankruptcy Code”) on February 23, 2018. The IRS filed a proof of claim.[7] Debtor filed an objection to the proof of claim on July 16, 2019.[8] The IRS filed a motion for summary judgment in opposition, arguing the lien remained enforceable and the Debtor lacked standing to challenge the proof of claim.[9] The Debtor filed a cross-motion for summary judgment, arguing the lien had been satisfied and the prior tax assessments made against the Spouse were illegal.[10]
The court granted the IRS’ motion for summary judgment, and dismissed the objection.[11] The court noted “[t]he record unquestionably shows that the Judgment Lien itself remains on the real property records of the Marin County Recorder’s Office and has not been cancelled, revoked, or otherwise rendered ineffective.”[12] The Judgment created a lien on the real property upon the filing of the abstract with the county office under 28 U.S.C. §3201(a).[13] The Debtor lacked standing to challenge the penalties assessed against the Spouse, as she had acquired her interest after the judgment lien was recorded, and the “rights she acquired [were] subject to” that lien.[14] Accordingly, the court denied the Debtor’s cross-motion challenging the merits of the tax assessments and penalties.[15] The Debtor stood in privity with the Spouse from the quit-claim of the property and the Debtor put forth the same meritless arguments as her Spouse had made in previous suits against the United States.[16]
According to the California bankruptcy court, a judgment lien cannot be released without satisfaction pursuant to 28 U.S.C. § 3201.[17] Any individual who receives property via quit-claim deed has ownership that is subject to any existing, unsatisfied judgment liens previously recorded against the property.[18] A debtor does not have standing to challenge a prior tax assessment, which led to a preexisting judgment lien, where the debtor’s ownership rights in the assessed property is subject to that judgment lien.[19] Consequently, a judgment creditor may be able to pursue its remedies against property that was subject to a lien post-bankruptcy.
[1] See In re Brinskele, No. 18-30194-DM, 2021 BL 1104 at *2-5 (Bankr. N.D. Cal. Apr. 23, 2021).
[2] See id. at *1-2 (Penalties assessed for unpaid tax under 26 U.S.C. §6672).
[3] See id. at *2.
[4] See id. at *3, citing Brinskele v. United States of America, No. 1:02-cv-00911-NBF (Cl. Ct. Sept. 3, 2009.) (Spouse sued after the IRS announced it would no longer impose an excise tax on customers of certain long-distance communications phone carriers, like one that was owned by the Spouse).
[5] See id. at *3.
[6] See Id.
[7] See id. at *1–2.
[8] See id.
[9] See id. at *2.
[10] See id.
[11] See id. at *10.
[12] Id. at 5.
[13] See id., citing 28 U.S.C. §3201(a) (“Creation. – A judgment in a civil action shall create a lien on all real property of a judgment debtor on filing a certified copy of the abstract of the judgment in the manner in which a notice of tax lien would. . . A lien created under this paragraph is for the amount necessary to satisfy the judgment, including costs and interest.”).
[14]In re Brinskele at *8 (“Debtor held no interest in the property until after the IRS recorded its Judgment Lien. Whatever rights she acquired are subject to the Judgment Lien.”)
[15] See id. at *9.
[16] See id. at *8 (“Spouse unsuccessfully presented similar arguments to multiple courts, as discussed above. . . she stands in privity with Spouse, who quitclaimed the Property to her after the Judgment Lien was recorded.” citing Brinskele v. United States, 73 Fed. Cl. 227, 227 (2006), reconsideration denied, 2006 WL 5726105; Brinskele v. United States, 88 Fed. Cl. 334 (2009); Brinskele v. United States, 397 Fed. Appx. 662, 2010 WL 4085181 (Fed. Cir. 2010)).
[17] See In re Brinskele at *5–6.
[18] See id.
[19] See id. at *8.